Collector- June 2018 - 10

BESTPRACTICES

Diversifying Your Market
How to break into a new asset class without risking what you've already built.
By Anne Rosso May

F

rom the day Sentry Credit opened
its doors in 1992, the Washingtonbased debt collection agency
focused on serving large financial clients.
And for many years, business was
great. The company plugged into bigger
and bigger networks in the market,
gradually adding more clients. And then
the real estate crash hit in 2007 and loan
originations evaporated-as did new
account placements.
Times were tough, and Sentry Credit
chief operating officer and co-founder
James Stewart watched many of his debt
collection peers shutter their businesses
completely. Sentry made it through the
downturn, but with a new perspective.
"We knew that we could never again
expose ourselves to the volatility of one
particular market or allow one market to
represent such a high percentage of our
company's business in the future," Stewart
said. "No matter how great you are doing
servicing a particular niche or space,
circumstances beyond your control can
change almost overnight."
Diversification can help protect your
company from market fluctuations while
also driving growth. This could mean
pivoting to work brand-new, more lucrative
markets or adding adjacent business lines to
help increase your value to clients.
But before you stretch your wings,
you'll need to make a plan. And if you're
making a night-and-day leap-such as
from financial services to health care-
Michael Lamm, managing partner at
Corporate Advisory Solutions, said you
should expect the process to take two
to three years before you start getting
placements in the door.
Here are three tips for companies
thinking about diversifying into a new
asset class.

10

CONSIDER BUYING YOUR WAY
INTO A MARKET
Jumping into a completely different
market can be difficult to do organically,
which is in part why Stewart recommends
buying your way into one. In 2015, Sentry
did just that, purchasing a small local
medical collection agency to expand its
footprint in the health care sector. 
"That's what I call 'fast-tracking it,'"
he said. "The sales cycle can be so long
and arduous that sometimes it may make
more sense to buy another agency with a
large book of business."
Expansion through acquisition will give
you the staff, infrastructure, technology
and know-how to tackle a new market,
potentially preventing you from making
rookie mistakes.
The other plus to this approach? "All
the money you save by not having to
duplicate your fixed costs and all the
other related expenses, which really add
up to be a lot and can affect your bottom
line," Stewart said.
If you don't want to go the acquisition
route, Lamm suggested hiring a seasoned
executive with experience in the new
sector who knows both sales and
operations. This person can help open the
right doors and spearhead the expansion.
Sentry took this approach when it
created its property management division
in 2016, hiring industry expert Michael R.
Bowman to lead the charge in that space.

BUILD ON YOUR STRENGTHS
TO CREATE VALUE
Market intelligence reports can help you
make an educated decision about a new
sector before making any big shifts with
your business model.
"They can help you understand what's
involved on every level," Lamm said,

noting that half the time agencies who
request such a report determine that the
market they were thinking about is not
actually a good fit for them.
If you find that a dramatic leap would
be too costly or time-consuming, consider
expanding into areas that complement
your existing service offerings.
"For instance, within health care
there are tons of adjacent lines of
business: Medicaid eligibility, denials
management, workers' compensation
and first-party (pre-collect) medical
collections," Lamm said. "To pivot
into those lines of business for a
traditional third-party health-carefocused agency wouldn't require you
to recreate the wheel."
You'd still need to learn some new
processes, but you'd be strengthening
your relationships with your clients by
offering more service lines.

ACAINTERNATIONAL.ORG


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